Working Paper
An examination of rating agencies' actions around the investment-grade boundary
Abstract: Data on credit ratings by the agencies with the legal status of Nationally-Recognized Statistical Rating Organizations (NRSROs) show some tendency for one-day downgrades that start from the lowest investment grade, BBB-, to travel more grades than those from neighboring grades. This would be consistent with the lower threshold of the NRSROs' grade BBB- being at a substantial default probability, but also could occur simply because downgrades to junk severely impair some firms' operations. A comparison of data from a non-NRSRO agency and an NRSRO shows that the latter's regrades from BBB- moved in the direction of the non-NRSRO's earlier ratings. This suggests the non-NRSRO defines its grade BBB- more narrowly than the NRSRO.
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Bibliographic Information
Provider: Federal Reserve Bank of Kansas City
Part of Series: Research Working Paper
Publication Date: 2003
Number: RWP 03-01